Hexaware, MindTree, UST Global, Syntel and Tech Mahindra raking in more money from large clients like Airbus, American Express and Walmart for bigger gains

BANGALORE: The tone of managers at mid-sized technology companies is quite clear these days: "Dig deeper, dig better!" Small IT service firms are mining more from their major offshore clients like Airbus, American Express and Walmart as they move back to top of the deal table, where the Big 5 tech firms rule the roost.

This shift is very clear in the way mid-sized companies are approaching business – focus on breadth is giving way to greater focus on existing accounts. Hexaware, MindTree, UST Global, Syntel and Tech Mahindra are among mid-tier firms raking in more money from large clients.

And to boot, they are winning deals from larger clients given that some major customers are not-to-happy with the top outsourcing firms. Hexaware Technologies, whose annual revenue target is $302 million this fiscal, won a $177-million deal from an existing client.

A typical example of how they are cutting bigger deals in the outsourcing market, this transaction will fetch the firm $100 million in incremental business and another $ 77 million from the extension of existing business over five years. The company, which has been hiring account managers to focus on large accounts, bagged a $25-million deal from another existing customer where it competed with the larger Indian companies. Bangalore-based firm MindTree has changed tacks over the last six months.

The company came out clearly saying that it is done with growing sideways and is going to delve deeper into existing customer accounts and technologies. The strategy seems to be paying off as MindTree and Syntel have been gaining business from American Express, an industry expert said.

American Express is a top customer for most IT majors including Infosys and TCS and one estimate pegs the revenue Infosys and TCS gets from American Express to be over $200 million. MindTree CEO KK Natarajan says: "The first hurdle of getting called to the party is taken care of with large companies showing willingness to empanel us." But getting called to the party is not enough.

Midsized companies have more battles to fight since even larger players are trying to get more bang from their big accounts. Wipro, for example, has renewed its focus on large customers called "mega gamma" accounts. Eighteen months ago, on an average, Wipro's top 10 customers gave it business worth $72 million. This has now gone up to $100 million.

"We suddenly see tier 1 players become active on the big accounts. But at the end it's a free market," argues Natarajan. UST Global, whose shares are not publicly traded, has been following the strategy for a long time now. The company has a topline close to that of MindTree but onefourth the clients. Industry watchers estimate its margins to be higher than its peer group and that is mainly because the company has been going after select clients and investing in those accounts.

"We try to find clients where we can build deeper relationships," said Krishna Prasad, general manager- India, UST Global. The firm has far fewer clients – 65 at rough estimate --than a traditional mid-sized company of their size would have. Pradyumna Sahu, associate director, technology sector at PwC India says that the strategy (of mining existing clients) works for mid sized players for now. But soon they will have to start acquiring new clients more aggressively.

Companies start off with a large portion of revenues coming in from few large accounts but as they grow, the share of top clients starts falling. "Mid tier companies have to diversify their client base and increase new client acquisition to move to the next level," he said.

Rival mid-sized players have also been mining their large accounts. Says Mahesh Shastry who heads the travel, transportation and logistics business for Sonata Software: "We entered the German market through a joint venture with the TUI group, a leading European tour operator. From then on, we have been able to acquire more business from the group. The TUI group is now looking at integrating its inventory management and more business is likely to come our way."

Concentrating too much on marquee customers also comes at a price. The company becomes overly dependent on one customer and differences between the company and its client could dent it at some point, some experts argue. "On the contrary, the customer also becomes dependent on the company in a way and the relationship holds," argues PN Sudarshan, senior director at Deloitte India.

"The competition is intense and it's not a virgin market anymore and going after existing customers in comparison with acquiring new logos is easier," adds Sudarshan who has worked with many mid sized companies. For small companies, it makes sense to go after existing large accounts as against acquiring new clients, says Sunil Bhatia, who recently took over as managing director of Blue Star Infotech (BSIL).

"Mining is easier and cost effective. We live on niches and that helps us win against Tier 1 players," he adds. Bhatia plans to grow the business by targeting more business from large customers like tech major HP and retail giant Costco where he has to compete with larger rivals like Capgemini and Infosys. Experts say a balanced approach between acquiring new clients and mining is the way forward.